Interest rates set to hit 5 per cent in blow to homeowners as double digit inflation persists

Homeowners faced a fresh blow after higher than expected inflation raised fears interest rates could hit 5 per cent.

Mortgage holders have been hit by a series of interest rate rises as the Bank of England attempts to bring spiralling price increases under control.

Interest rates – which dictate the cost of borrowing – are currently at 4.25 per cent. They were expected to peak at 4.5 per cent and fall back toward more normal levels next year. But after the Office for National Statistics said inflation in March remained in the double digits – defying economists’ forecasts it would dip to 9.8 per cent – traders ramped up bets interest rates would rise.